Strategy: Pending Short
We entered short EURUSD at 1.2556 as prices put in a Bearish Engulfing candlestick pattern below resistance at the top of a Rising Wedge pattern carved out since late July. Prices narrowly triggered our stop-loss with a daily close above 1.2588 on yesterday’s candle, yielding a small loss (-42 pips).
Overall positioning still appears ripe for a downward reversal, with prices continuing to hover below Wedge resistance. That barrier is reinforced by the top of a long-term channel set from late-August 2011 while negative RSI divergence reinforces the case for a downside scenario.
With that said, a clear-cut entry signal is absent and the upcoming ECB rate decision creates a major event risk overhang that could materially change the setup. We will stand aside for now and allow positioning to develop before re-entering short.
Daily Chart - Created Using FXCM Marketscope 2.0
--- Written by Ilya Spivak, Currency Strategist for Dailyfx.com
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